more than 10 per cent
in early 1998, forcing the central bank to tighten the money supply, thus pushing up interest rates. The stock exchange crash, which followed in August–September 1998, aggravated the situation even further. For the government, the high cost of refinancing and strict IMF provisions left little room for implementing the plan. Besides, volatility of international oil prices (Russia's main source of foreign currency income) makes long-term planning difficult.According to experts,
the plan laid out by the Ministry is too ambitious in relation to available resources. Neither does it distinguish between internally generated investment and FDI for industrial restructuring. The formulation and implementation of a separate FDI policy that fosters international cooperation and exchange of know-how among enterprises would ultimately improve the financial situation of economic operators in Russia so that they can contribute more effectively to a government plan for technological and social development. General framework conditions should be improved before concrete FDI policy instruments
can be implemented. The most important task will be to define the optimum combination of macro and FDI-related measures for achieving the desired results, with a minimum of resources and within set deadlines. The time factor is important in policy formulation and implementation.Policy efforts for FDI should be directed to seven main areas:
|• ||improving general framework conditions: law, taxation, public administration and macroeconomic indicators;|
|• ||offering incentives packages for important projects;|
|• ||assigning special zones for economic and technological development;|
|• ||carrying out proactive training, information, promotion and image-building campaigns in Russia and abroad;|
|• ||building an FDI advisory network;|
|• ||providing financial engineering for important industrial projects;|
|• ||establishing an internationally recognized FDI agency.|
The measures described in the following chapters aim to raise issues and offer guidelines rather than strict policy mechanisms. A government programme to intensify investment must strike a careful balance of cultural, political, social and economic choices. Budgetary constraints and tradeoffs with other vital socioeconomic issues (e.g. indexation of pensions, unemployment benefits, upgrading of the healthcare system, environmental protection) should be taken into account.
Urinson, 'Perspektivy investitionnoi aktivnosti' [Prospects of investment activity], Ekonomist, no. 2, 1997, pp. 3–9; OECD, Economic Survey. Russian Federation, 1997, pp. 128–9.